Server Revenues Down In Tough Economy

The sales drop in expensive servers was particularly felt by vendors of RISC-Itanium Unix servers.

Worldwide server revenue fell in the third quarter, as companies put off buying more expensive computer systems in the slow economy, a market researcher said Monday.

Revenue dropped 5.4% from the same period a year ago to $12.7 billion, according to Gartner. Server shipments during the quarter, however, rose 4.4% to 2.3 million units, as companies continued to buy low-priced x86 servers.

"Server shipments grew in the third quarter, but the specter of constrained economies and tightened credit was felt in the revenue area,” Gartner analyst Jeffrey Hewitt said in a statement. "What we've seen is larger system purchases in the Unix area put in check. At the same time x86 servers were able to maintain some shipment momentum, but lower overall average x86 server selling prices resulted in a drop in revenue in the quarter for this server type as well."

The sales drop in expensive servers was particularly felt by vendors of RISC-Itanium Unix servers. Shipments for the category fell 16.1% and revenue was down 10.8%.

All top five vendors saw a decline in revenue in the third quarter, with IBM holding on to its market leadership through sales of System p and System z brands. Overall, IBM finished ahead of second-place Hewlett-Packard by about half of a percent. Rounding out the top five were Dell, Sun Microsystems, and Fujitsu/Fujitsu Siemens, respectively.

Of the top five vendors, Sun saw the biggest year-to-year revenue drop at 13.7%. Sun last month said it would cut from 5,000 to 6,000 jobs, or from 15% to 18% of its workforce, as it struggled with depressed demand for its high-end computers.

In terms of shipments, HP held on to its leadership position, increasing its market share nearly 2% to 31.2%. Dell continued at No. 2 with a 21.6% share, followed by IBM, Sun, and Fujitsu/Fujitsu Siemens, respectively. The rankings were unchanged from the second quarter.

Just because the server market's in the doldrums doesn't mean innovation has ceased. Far from it -- server technology is enjoying the biggest renaissance since the dawn of x86 systems. But the primary driver is now service providers, not enterprises.